This year’s World Economic Forum WEF is headlined: “The Great Transformation: Shaping New Models”. However, the term “The Great Transformation” does not seem to be all new to us. It has not been invented by Klaus Schwab, Founder of the WEF, but by the Austro-Hungarian philosopher Karl Polanyi. As early as 1944 he described what he understood as the “Great Transformation”: The transformation of traditional societies into market societies, characterized by the subordination of the substance of society to the laws of the market.
For many years, the World Economic Forum was almost a synonym of this development, and to big business; and politicians who attended the forum seemed to understand economy as “the continuation of politics by other means.” As opposed to Clausewitz, who understood war as “the continuation of politics by other means”, they certainly shaped a more peaceful process. Nevertheless, the WEF was one of the most important forums and market places of “The Great Transformation”: The subordination of all realms of society under the laws of economy. Those were the days when protests against the WEF mobilized thousands of “anti-globalization activists”, and the critics of capitalism were suspected to be reactionary communists.
Today, there are just a few dozen protesters, and Klaus Schwab himself publishes the following sentence on the front page of the WEF website: “Capitalism, in its current form, no longer fits the world around us. We have failed to learn the lessons from the financial crisis of 2009. A global transformation is urgently needed and it must start with reinstating a global sense of social responsibility,” (http://www.weforum.org/). What a remarkable shift! Are the illustrious attendees of the forum willing and able to work towards a second “Great Transformation?” Do they understand what has been wrong with “Capitalism in its current form?”
I dare to doubt. I dare to doubt that “Capitalism in its current form” is capitalism at all! I haven’t heard any better analysis of what we have seen during the last couple of years than the one of Marc Chesney, Professor of Finance at the University of Zurich, who said this was not capitalism but “betrayal of capitalism”. According to him, capitalism is based on an elementary principle: Those who are taking entrepreneurial risks, are entitled to reaping the benefits of their endeavors. However, “Capitalism in its current form” has been the art of separating risks from benefits, of creating “absolute return” to owners of capital, no matter which way the markets would develop. Governments, tax payers, unemployed people, society at large are paying the bill today and in the future.
Thus the problem is not with capitalism, but with its abuse by those who created – or tried to create – private wealth at the cost of society, and legitimized their action by referring to mainstream economics. Stakeholder theory is about value creation through fair exchange of risk and benefit potentials in stakeholder networks. This has been described and explained by many scholars from Freeman’s seminal Book in 1984 (Freeman, R. Edward, 1984: Strategic management: A stakeholder approach. Boston: Pitman) to the latest publication of my colleagues Sybille Sachs and Edwin Rühli at HWZ (Sachs Sybille / Rühli Edwin, 2011: Stakeholders Matter, Cambridge: Cambridge University Press).
We may call it capitalism; we may call it anything else: I do agree with Schwab, a “Great Transformation” is needed. However, I would call it “The Great Transformation 2.0”, towards true leadership and management in the service of a peaceful and prosperous global society. Do we need the WEF for this insight? Not really: We could have known earlier – at least since 1944 – and we could have known better – at least since 1984. Let’s hope the attendees of the World Economic Forum 2012 are wise enough and fast enough – not to turn back the wheel, but to make credible steps forward towards a fair and more stable economic system in the service of humans around the globe.